If a technological change makes it harder to substitute capital for labour, the demand curve for labour
A) becomes more elastic.
B) shifts parallel to the left.
C) is not affected.
D) becomes less elastic.
E) shifts parallel to the right.

Question

Quizplus · Accepted Answer

When a technological change makes it harder to substitute capital for labor, firms become more reliant on labor and therefore, the demand for labor becomes less elastic. It means that the firms become willing to pay a higher wage for the same amount of labor. Hence, the answer is option D.

If a Technological Change Makes It Harder to Substitute Capital